China doubled down on its efforts to ban cryptocurrency trading this week when the Chinese Government issued a statement warning investors that bitcoin’s (BTC) value is “heading to zero.”
The move attempts to dissuade citizens from investing in cryptocurrencies and follows China’s previous efforts to crack down on bitcoin trading, including shutting down bitcoin exchanges and banning initial coin offerings (ICOs).
What is Bitcoin, and Why is it so Popular?
Bitcoin is a type of cryptocurrency, a series of “digital or virtual currencies” that uses peer-to-peer technology to facilitate instant payments. It was created by an anonymous person or group under Satoshi Nakamoto and released as open-source software in 2009.
Bitcoin is often referred to as “digital gold” because it shares many of the same characteristics as gold—it is decentralized, scarce, and global.
One key difference between bitcoin and gold is that bitcoin is still in its early stages of development, and gold has been used as a form of currency for centuries.
China’s Stance on Bitcoin
The Chinese media agency, Economic Daily, made a statement this week, warning people about bitcoin’s high-risk and volatile nature. This is in line with what the Chinese Government has been saying about bitcoin for some time now.
In 2017, China banned bitcoin exchanges and ICOs from controlling the market’s speculative nature. At the time, bitcoin prices were skyrocketing, and China was concerned about people getting caught up in the hype and investing more money than they could afford to lose.
The Chinese Government’s latest warning comes as bitcoin prices have declined steadily over the past year. Bitcoin is currently trading at around $3,500, which is more than 80% below its all-time high of nearly $68,000 in December 2017.
With this latest downturn, China appears to be taking advantage of the situation by scaring people away from bitcoin while prices are low. The Chinese Government states that bitcoin is a “speculative” asset and that investors should be prepared to lose all of their money.
Why China is Threatening Bitcoin Now
The timing of the Chinese Government’s latest warning is interesting because it comes at a time when bitcoin prices are already struggling.
Some experts believe that the Chinese Government is trying to take advantage of the current situation to further dissuade people from investing in bitcoin.
Others believe that the Chinese Government is simply reiterating its previous warnings about bitcoin and that this latest statement is not indicative of any new policy changes.
Either way, statements in the Economic Daily Report suggest that bitcoin is, “nothing more than a string of digital codes.”
The report also predicts that in the future, when investor confidence in bitcoin will go down completely, so will the value of this cryptocurrency, to the point where it will be “worthless.”
Reaction from Other Big Name Players
It seems that the Chinese Government isn’t the only one concerned about Bitcoin.
Just this week, Tom DeMark, the CEO of DeMark Analytics, a financial analytics firm, said that BTC falling 50% from its latest peak back in November 2021 could potentially prolong price reductions.
DeMark also predicts that this astronomical breakdown will have a high chance that Bitcoin “will require many years, if not decades, to recover.”
However, he sheds some optimism, saying that “BTC still has a slight chance to bounce back into the more respectable $40,000 range within the next few months.”
What the BoE Thinks About Bitcoin
The Bank of England (BoE) has a much more optimistic view of bitcoin and its role in the future. In a recent report, the central bank said that bitcoin and other cryptocurrencies “have shown promise” to facilitate instant payments.
BoE Deputy Governor Jon Cunliffe states that crypto companies that managed to keep their business afloat even during the current downturn could potentially turn things around and be the dominant players in the market in years to come.
Despite the recession of BTC, Cunliffe believes that crypto technology and finance will continue to flourish. In turn, it can make considerable changes in the market structure in the next few years.
In a recent tweet, El Salvador President Nayib Bukele also stated about Bitcoin’s slumping numbers. He encouraged people to stop looking at the numbers and “just enjoy life” as the prices will eventually recover.
Bukele has received criticism for investing in Bitcoins and sustaining losses upward of ten million dollars.
However, Alejandro Zeyala, El Salvador’s Minister of Finance, argues that Bukele’s investment wasn’t at a loss because he hasn’t sold the coins yet.
At the writing of this article, BTC is trading at $20,386, which is 71% below its all-time high and 0.7% down over the past 24 hours.
Of course, there’s no telling where prices will go from here, but it’s safe to say that the current market conditions are not ideal for Bitcoin or any other cryptocurrency.